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The Upshot at the JPMorgan Tech Conference: the Numbers in Hand

Is It High Noon Yet?

Palm Computing (PALM) CFO Judy Bruner served the shots straight up to investors.

As the JPMorgan H&Q crowd lined up its questions, one by one, she didn't flinch. She pounded down an answer and told them to drink. Demand, you lily-livered varmints, tailed off uncharacteristically in March and took another step down in April.

Instead of building from the post-Christmas doldrums in January through the spring, April's sell-through was 20% lower than January's, according to PC Data. No, pardner, that wasn't solely in the U.S., but the softness hit the same time in Asia and Europe. The same time. So a 60% to 40% domestic/international sales balance won't help them. You wanna talk components? Let's talk about the single suppliers that hooked Palm into lots of component orders last year. Palm's upped that to several suppliers, but that won't black out the pain of the up to $200 million in inventory it's going to be staring at by the fourth quarter of 2001. Palm could slap investors with another write-off, but Bruner's not giving any details. Price slashing is in effect to get rid of some of the components that already have been built into finished products, but remember that a week or two in April didn't make things right.

Yes, some of that comes from the delayed launches of the m500 and m505 handhelds, which Bruner says are on sale but not expected to ramp fully until next quarter at the earliest. Before then, consumers are sitting on their hands and not buying. "Clearly we have a lot of old products on the shelf," she said of Palm vendors. "They are anxious for new products at this time. Having those products helps existing products sell through as well -- the consumer wants to see all the alternatives before buying."

I'm gonna need a double.

So, is Palm going to survive? Jittery inquirers asked when she'd get nervous about her cash position. Bruner replied her two key issues were moving the component inventory -- which may or may not go into products -- and potentially selling or renegotiating the land for Palm's planned headquarters. Would she consider moving from the lower-margin hardware businesses to selling just the software (now 4% of Palm's revenues), without the component, consumer and vendor headaches? "That would be a high-margin business," she said, never breaking into a smile. And she answered probing questions off into the sunset.

Motorola's Disappearing Act

Motorola (MOT) is getting good at saying goodbye. SVP Leif Soderberg told the conference crowd that his company is cutting 12,000 employees, or a mind-boggling 30% of the handset staff. It's bidding adieu to almost 20 cell-phone and connected PDA designs, leaving it with four to five handsets in 2002. It's handing off 20% of its manufacturing to outsourcing firms, a number that will grow to 40% in 2002. Finally, it's waving off a policy that constrained Motorola's semiconductor division to creating wireless chips for Motorola products only, embracing external customers.

Now, if it can only do the same for the 35 million in extra handset units above the usual six to seven weeks of inventory Soderberg estimates were stuffed in the market at the end of 2000. He says the industry worked off half that excess in the first quarter of 2001, and hopes to ditch the other half in the second quarter. "The prospects look pretty good," he said.

In the equipment market, Motorola investor relations chief Ed Gams said hello to the possibility of Motorola making a move with its third-generation wireless baystation business -- given that it offers the radio-access side but not switching products. "Maybe we should stay on the radio-access side and leave switching to others. Maybe we should look for a relationship," he said. Stay tuned. -- Tish Williams

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